Terrorism and Its Impacts on Export of Pakistan an Empirical Analysis Zia Ur Rahman * and Nasir Jan School of Economics and Business Administration,Beijing Normal University, Beijing 100875, China Abstract This research paper study the empirical relation between export and terrorism in Pakistan. Using data from 1996 to 2015, by applying the simple linear regression model, the Ordinary Least Square (OLS) testing approach is used to check the relationship among variables, the normality and linearity of the data have been checked. By estimating the Model the result clearly showed that there is significant relationship between both variables, terrorism have negative significant effects on Pakistan export. The study suggests that government should take positive step to maintain peace in the country and negotiate with all terrorist groups and parties who are responsible for all that kind of vicious activities. It hampers economic growth of Pakistan, as export play a vital role in the economic growth of a country. Keywords: Export, Terrorism, Pakistan 1. Introduction There are no single definitions to the term terrorism. Laqueur (1987), described, Terrorism is the use or the menace of the practice of fierceness, a method of battle, or a tactic to attain definite aims and according Alexander (1976) terrorism is the use of fierceness against arbitrary civilian objects in order to frighten or to create general pervasive terror for the aim of attaining political goals. Terrorism is, in its broadest sense, the use of deliberately undiscriminating fierceness as a means to make terror, horror, fright or fear, in order to attain a political, religious, or ethical goals. In general words, terrorism means any activities or actions that increase fear and anxiety in the world, region or country are called terrorism and persons who involves in that specific activities are called terrorists. Before terrorist attacks in United States there was a lack of research in this study but after that, this topic got pretentious attentions. Since the dreadful events of September 11, 2001, with the attacks on the World Trade Center, the issue of terrorism has burst on the global platform. The United States declared a war against terrorism. Backup united states against Taliban, Pakistan have faces many threats and intense consequences of terrorism. In the recent, Pakistan is facing the menace of terrorism, facing the costs of Afghan War after the Soviet invasion in 1979, Pakistan is also influenced by numerous ethnic, political, religious and linguistic clashes which have enhanced terrorists activities in the country. Pakistan is also included in one of the top terrorism affected countries list, on the Globe. According to Global Terrorism Index (GTI), among 159 terrorism effected countries, Iraq ranked first, Pakistan second, Afghanistan third and India fourth, Husain et al (2014).Between 1 st January 1996 to 31 December 2015, a total of 11378 incidents of terrorism have occurred on Pakistan s hapless soil, resulting in 19249 human losses and 33281 injuries of both civilians as well as personnel of law enforcement agencies. It is officially estimated that Pakistan s economy has been impacted to the extent of over US$ 51.3 billion between 2001 and 2010, and causes huge reduction to GDP growth and FDI, loss of employments, income and export, damage to infrastructures and tourism industry, exchange rate depreciation and inflation, capital and human capital flight, and much more. Pakistan Embassy, Economic division FY (2011). There is many study conducted to check the terrorism effects on development, economic growth and impacts on inward FDI of Pakistan but this study will discuss the impact of terrorism on export of Pakistan. Terrorism directly leads to capital and human loss, which effect all the production, consumption and investment in the economy, there are also capital and human flight from economy, industries shut down, labors hesitate to go for work and so on. The objective of this study is to find out links between terrorism and export and the impact of these attacks on productions and business activities of Pakistan. The secondary data for last 20 years have been used for analysis. Oladimeji and Sanjo (2014) conducted a study for Nigeria, and find out that terrorism has both direct and indirect significant effects on international business, they use random sampling methods for the study. A pilot study through test-re-test method was conducted to check out the consistency of Pearson s product moment correlation coefficient with these results,72% for balance of payment, 68% for foreign exchange earnings, 67% for foreign investors while 83% for financial market. Nitsch and Schumacher (2004) examines the effect of terrorism and warfare on international trade, and observes trade flows between more than 200 countries over the period from 1960 to 1993.An augmented gravity model are used and find out that terrorism reduce the volume of trade,doubling in the number of terrorist incidents, decrease bilateral trade by over 4 percent. Fatima et al (2014) have find out the empirical evidence of terrorist activities impact on the economic growth and the results 109
showed that the terrorist activities have a negative impact on the economic growth of a country. Tavares (2003) suggested that terrorist activities in a country effect on development of a country, he estimate the cost of terrorism in developing countries. Shahbaz et al (2013) and Hussain et al (2014) find out the relationship between terrorism and FDI, there result shows that there is negative significant effects of terrorism on net inward FDI in Pakistan. There is very limited number of literature available in this study, so this research has been conducted to check the impact of terrorism on export of Pakistan. Export is considering an engine for economic growth in developing countries. The research aims is to closing gap on the impacts of terrorist attacks on export of Pakistan. Our research question as: Is there any negative relationship between terrorism and export of Pakistan or not? 2. Theoretical Frame Work In this study we will check the relationship between terrorism and export of Pakistan, terrorism can be measured as the number of incidents annually, which includes all types of terrorist attacks and activities regardless of doubt, and export is the total net export of Pakistan to the rest of the world in US billion dollars annually. Export means sending of the goods and services out of the dominion of a country, or "exports" refers to selling of goods and services produced in the home country to other foreign markets. Here the net export means the final market value of goods and services in US dollars. Exports of a country are considered as a main pillar of the economy, a source of earnings, and foreign exchange, employment opportunities and ability to achieve strong and sustainable growth for a country, Alam (2015). 2.1 Research Design In this study export has been taken dependent variable and terrorism is independent variable. The data sample of this study is from 1996 to 2015 for 20 years. Secondary data has been used which are collected from different sources. Data of export has been collected from World Bank (WB) and data of terrorism has been taken from Global Terrorism Data Base (GTD). 2.2 Hypothesis of the Study H 0 : There is no Relationship between export and terrorism in Pakistan H 1 : There is a relationship between export and terrorism in Pakistan 3. Data Analysis Table 1. Historical overview of terrorist activities in Pakistan (1996-2015) Years Terrorism Indicators Net Export No s of Incidents Fatalities Injured 1996 180 423 735 10.70306 1997 206 443 525 10.04049 1998 37 151 350 10.25221 1999 39 127 246 09.66869 2000 49 118 423 09.94017 2001 53 109 265 10.60027 2002 46 108 317 11.00771 2003 29 120 182 13.91767 2004 67 304 671 15.35007 2005 78 150 297 17.18032 2006 163 314 669 19.40085 2007 260 1407 2343 20.13718 2008 564 1168 1883 21.05956 2009 667 1487 3543 20.84380 2010 700 1691 2961 23.97878 2011 993 1642 2625 29.83104 2012 1652 2600 4227 27.81608 2013 2213 2872 5774 30.69924 2014 2147 2409 3397 29.91608 2015 1235 1606 1848 28.69088 Sources: https://www.start.umd.edu/gtd/ and http://data.worldbank.org/ Annual data from 1st January to 311st December Above table data show total no s of Incidents, Fatalities, Injuries and Net export. No s of incidents have includes all and every type of attacks or terror regardless of doubts, terrorism data have been taken from global terrorism data base (GTD) and data for total net export in US billions dollar is taken from World Bank 110
(WB). Figure 1. Total No s of Incidents and Human losses since 1996. Figure 2. Total Net Export in US billions dollars 3.1 Hypothesis Testing The OLS techniques is used to check the linearity and normality of the data used in this research paper. The basic assumption of simple linear regression Model is that both variables will be correlated and the model should be best fitted and significant, and there should be constant variance of residuals. Our Model is: Exp = β 0 + β 1 Terr + ε. (1) Exp = Export, dependent variable β 0 = intercept or constant term β 1 = coefficient or effects of independent variable Terr = Terrorism, independent variable ε = error term or residuals The model value of constant is 23.037 and the value of the β is.027 which shows the variation in export due to terrorism incidents. β value is small due to transformation of the data. 4. Findings and Estimations The export data have been change to log and square root of terrorism have been taken for the better transformation and analysis. There is no problem of homoscedastic but however there is some issue of serial 111
correlation in our data. The model have been estimated which gives the following outcomes and results. In above descriptive statistics tables the mean and Std.Devaiation of two variables is presented. In the above Correlations table, it is clear that there is strong correlation between dependent and independent variables. Export is dependent while terrorism is independent variable. The coefficient is.872 which is significant at the 1% level of significance, which shows strong correlation among both variables. The above table shows the values of R square is very significant which indicates that there is 76% variation in export, adjusted R square value is.74, means there is strong relationship between both variables. The model is good fit as the F statistic indicated by ANOVA is 56.957. The above table displays the regression coefficient of terrorism for dependent variables of export. There is significant impact of terrorism on export as clear from the coefficient value of.872 accompanied by t- statistics 7.547. Estimate the impact of terrorism on export at 1% level of significance. 5. Conclusion and Suggestion We conclude from the current findings that there is a negative association between export and terrorism in 112
Pakistan. Terrorism activities decrease export negatively. Null hypothesis is rejected while alternative hypothesis is accepted which as, there is a relationship between export and terrorism in Pakistan. Terrorism is an evil which hinder economic growth of Pakistan as export is considered to be the engine of economic growth and play vital role in any economy, Humayon et al (2011).According to the export led growth hypothesis, exports are the major source of economic growth Faridi (2012).So Pakistani government should cope with the problem of terrorism which is great loss for export, humans and capitals, and should negotiate with all terrorist parties and groups who are responsible for this destructive activates. References Laqueur, W. (1987). The age of terrorism (p. 287). Boston, MA: Little, Brown. Yonah, A. (1976). International Terrorism: National Regional and Global Perspectives. Praeger Publisher New York. Dinh DV Freedom and Security after September, 11(2002), 25. Hussain, N., Sajid, M., Sajid,k,R., & Khadim, S. (2014).Relationship between Terrorism and Foreign Direct Investment FDI in Pakistan. Research Journal of Finance and Accounting, Vol.5, No.17, 2014. Embassy of Pakistan FY (2011), Impact of Campaign against Terrorism on Pakistan s Economy Oladimeji, M. S., & Oresanwo, A. M. (2014). Effects of Terrorism on the International Business in Nigeria. International Journal of Humanities and Social Science, 4(7), 247-255. Nitsch, V., & Schumacher, D. (2004). Terrorism and international trade: an empirical investigation. European Journal of Political Economy, 20(2), 423-433. Fatima, M., Latif, M., Chugtai, S. F., Hussain, N., & Aslam, S. (2014). Terrorism and its Impact on Economic Growth: Evidence from Pakistan and India. Middle-East Journal of Scientific Research, 22(7), 1033-1043. Tavares. (2003, November 21-22). The ecomonic cost of terrorism. Shahbaz, M. A., Javed, A., Dar, A., & Sattar, T. (2013). Impact of terrorism on foreign direct investment in Pakistan. Archives of Business Research, 1(1). Hyder, S., Akram, N., & Padda, I. U. H. (2015). Impact of terrorism on economic development in Pakistan. Pakistan Business Review, 839. Alam, S. (2015), The Effect of Preferential Trade Agreements on Pakistan s Export Performance, Centre for Research in Economic Development and International Trade, University of Nottingham. No. 15/10 CREDIT Research Paper Humayon Asad Afzal, Sidra Ramzan, and Farid Ahmad. "Is the Uncertainty in Exchange Rate Hits the Exports in Pakistan?"The journal of commerece Vol.6, No 3 pp.30-38 Muhammad Zahir Faridi. (2012) Contribution of Agricultural Exports to Economic Growth in Pakistan, Pak. J. Commer. Soc. Sci. 2012 Vol. 6 (1), 133-146 113